It is a term used by legal immigrants of Hispanic heritage for the illegals. Especially in Texas but even in the far north.
Its used by many races in Texas as you said for aliens sneaking in.
And as a slur when it really does not apply to the person being called a wetback. I have never used the word outside of what it is truly meant to convey. Nothing wrong with that, an illegal border crosser deserves way worse than being called a wetback. sheesh...
I’ve heard texas old-timers us the term “wets” when referring to mexicans.